UK Helps Indonesia Put Price on Carbon Ahead of Bourse Launch in September
Jakarta. Indonesia and the UK on Monday inked an implementing arrangement that could help the Southeast Asian country give a price on carbon as it aims to launch a carbon bourse later this year.
The implementing arrangement was a follow-up to the memorandum of understanding (MoU) that the two nations had signed on the sidelines of Bali’s G20 Summit last year. Under this MoU, the British government had committed £2.7 million (around $3.5 million) to provide recommendations and policy studies for Indonesia’s carbon pricing.
Indonesia in 2021 issued a presidential regulation on carbon pricing.
The regulation states that Indonesia will have a cap-and-trade system that sets a limit on emissions. Businesses can trade allowances to emit greenhouse gas. Indonesia’s carbon trading mechanism will also include carbon offsets, in which businesses reduce greenhouse gas to make up for emissions that occur elsewhere.
“A concrete step that we should take is to [implement] carbon pricing and open up a carbon market, whose trading value can reach between $1 billion and $15 billion annually. We are one of the countries that are capable of absorbing carbon dioxide,” Chief Investment Minister Luhut Binsar Pandjaitan said in Jakarta on Monday.
“Our depleted [oil and gas] reservoirs and saline aquifers can absorb 400 gigatons [of carbon],” he added.
The country plans on launching a carbon exchange, which will facilitate the cap-and-trade system, this September. A pre-launch of this bourse is slated for August. The Financial Services Authority (OJK) will oversee the trading activities in the carbon exchange. The government to this day has yet to decide on the prices.
The carbon pricing cooperation is part of the British government’s UK PACT which aims to help partner countries’ climate mitigation efforts. British Ambassador to Indonesia Owen Jenkins told reporters following the signing that “Indonesia has extraordinary potential in this area as a carbon superpower. The UK has one of the longest experiences anywhere in the world of running carbon pricing and carbon markets. So we are delighted to work together in this area.”
Indonesia has updated its nationally determined contribution (NDC) targets. Indonesia is now aiming to cut 31.89 percent of carbon emissions on its own by 2030 — more ambitious than the initially announced 29 percent reduction. The coal-reliant country will raise this target to 43.2 percent if it receives international assistance.
Indonesia has set a goal to reach net zero emissions by 2060 or sooner.